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In a significant policy shift, the government of Angola, a central African country of more than 30 million, is set to remove all fuel subsidies by the end of 2025, according to officials at the country’s finance ministry.
The move is expected to revitalize the financial status of the state oil company, Sonangol, enabling it to resume paying taxes and dividends. Since the early 1970s, the national oil company has served as the principal steward and sole concessionaire of Angola’s vast subsurface resources, which include oil and natural gas.
One of sub-Saharan Africa’s largest oil companies, Sonangol has provided the Angolan domestic market with imported refined petroleum products at subsidized rates. With the government absorbing the cost difference, Sonangol’s ability to contribute to state revenues through taxes and dividends has been hampered.
The company’s last dividend payment was in 2019, coinciding with the launch of a substantial privatization program aimed at reducing costs and improving operational efficiency.
The repeal of the energy subsidy aligns with broader economic reforms that have been initiated by President Joao Lourenco. These policies, known as Propriv, have sought to modernize the economy and stimulate private investment.
The move comes as the Angolan government is contemplating a dual listing for Sonangol by 2026 in which shares of the national oil company will be sold in Angola and on an international stock exchange. Part of a larger privatization drive involving 23 state-owned enterprises, the energy subsidy repeal reflects the government’s commitment to reducing reliance on oil revenues and fostering a diversified, private-sector-led economy.
Government officials have hinted that the privatization of more than 40 additional state-owned companies, including financial and telecommunication entities, could be set to follow.
These reforms are seen as crucial for reducing Angola’s reliance on oil revenues and fostering a more diversified, private-sector-led economy. The move to privatize Sonangol is particularly significant, indicating a shift towards greater market orientation and global investor engagement in Angola’s oil sector.
Angola is one of the world’s largest petroleum exporters, producing between 1 to 2 million barrels of petroleum every day, and acceded to the Organization of Petroleum Exporting Countries in 2007.
The country has become an attractive destination for foreign investment over the last decade. Chevron, an American oil company, is currently working with Sonangol to construct a refinery in Soyo, which is projected to become the largest foreign investment in Angolan history.
Another energy giant, French multinational TotalEnergies, is similarly working with Sonangol to build offshore facilities in the Kwanza Basin, a depression in the Atlantic seabed off the coast of Angola home to one of the world’s greatest fuel reserves.
These facilities will use new technology that eliminates the need to flare methane and other gaseous byproducts of production, a practice that has traditionally emitted greenhouse gasses and other pollutants into the atmosphere. Eliminating methane flaring was one objective agreed to in principle by Sonangol and several other state-owned oil companies at the COP28 Conference in Dubai earlier this month.
These investments, in conjunction with Sonangol’s expanded role in decarbonizing energy production on the global stage, could position the company well within Western markets as Angolan officials look to bring its shares to market.
